Page 28 - Finances for Non-Finance People
P. 28
RATIO
✓Liquidity – has cash or access to cash to meet short-term financial obligations
✓A current ratio of 1.0 or more is the minimum ratio desired
✓1.0 means that your current assets would cover current liabilities
✓A current ratio too high (7 or more) can be an issue and should be investigated
✓Working capital amount is compared against current liabilities – assets should be
greater than liabilities
✓Quick ratio 1.0 means your assets would cover your liabilities (Note: below 1 is not
good, have more bills due than available assets to pay)
